what causes milkey oil and 0 compression in #1cyl.

Bad valve , cracked head and only half a piston .

Could be just a bad head gasket.

Yes but a blown head gasket usually will still show some compression . Were there any strange noises coming from that cylinder . Time for some exploratory surgery .

I saw a cylinder bore with a massive crack 1/16" x 2" and it wasn't cold weather. I think it had something to do with complications with nitrous oxide.

Pull the head off that side and I'm sure you'll find out. It's going to have to come off sooner or later anyway. Probably should just pull the entire engine and get it over with. Time's a waste'n!

Water intrusion, antifreeze, could be a few things. Typically a head gasket

Bad intake gasket,,if one of the corners are laeking cylinder # 1 can suck the water in,compress it and bend the connecting rod and or push rods..

Raw water, small blocks, Vortec heads?

We can guess all night though, do a leak down just to see the readings then pull it apart.